Development Bank Of The Philippines

v.
Hydro Resources Contractors Corporation,
G.R. No. 167603
March 13, 2013

Facts:

Marinduque Mining and Industrial Corporation (MMIC) was foreclosed by Development

Bank of the Philippines (DBP) and Philippine National Bank (PNB) and as a result of which
National Mining and Industrial Corporation was established where both banks acquired 57%
and 43% of its shares, respectively, except for five qualifying shares. Subsequently, NMIC
entered into a contract agreement with Hercon, Inc. for some construction works. The NMIC
failed to pay fully its obligation and was sued by Hercon. Both the trial and appellate court ruled
in favor of Hercon, making DBP and PNB solidarily liable with NMIC, ruling that NMIC is a mere
adjunct, business conduit or alter ego of both DBP and PNB.

Issue: Whether or not the piercing of the veil of there is sufficient ground to pierce the veil of
corporate fiction.

Ruling: No.

The doctrine of piercing the corporate veil applies only in three (3) basic areas, namely:
1) defeat of public convenience as when the corporate fiction is used as a vehicle for the
evasion of an existing obligation; 2) fraud cases or when the corporate entity is used to justify a
wrong, protect fraud, or defend a crime; or 3) alter ego cases, where a corporation is merely a
farce since it is a mere alter ego or business conduit of a person, or where the corporation is so
organized and controlled and its affairs are so conducted as to make it merely an
instrumentality, agency, conduit or adjunct of another corporation.

Both the trial and appellate courts relied on the alter ego theory when they disregarded
the separate corporate personality of NMIC. Case law lays down a three-pronged test to
determine the application of the alter ego theory, which is also known as the instrumentality
theory and this Court finds that none of the tests has been satisfactorily met in this case.